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Executive compensation

Executive compensation PurposeThe purpose of this paper is to examine how executive pay schemes influence managerial efficiency, which the authors measure as the risk-adjusted firm performance.Design/methodology/approachThe authors utilized hierarchical regression to test the hypotheses.FindingsThe authors find that as options constitute a higher percentage of total compensation packages, subsequent firm risk-adjusted performance declines. The authors also find an inverse relationship between TMT stock ownership and risk-adjusted performance.Research limitations/implicationsThe findings suggest that the firm stakeholders should reconsider the likely influence of option-based incentives and equity holdings on the risk-adjusted performance.Originality/valueMost executive compensation research focuses on either the pay-to-performance or pay-to-risk links. However, in this paper, the authors combine both the performance and risk dimensions simultaneously. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Strategy and Management Emerald Publishing

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1755-425X
DOI
10.1108/JSMA-02-2016-0015
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to examine how executive pay schemes influence managerial efficiency, which the authors measure as the risk-adjusted firm performance.Design/methodology/approachThe authors utilized hierarchical regression to test the hypotheses.FindingsThe authors find that as options constitute a higher percentage of total compensation packages, subsequent firm risk-adjusted performance declines. The authors also find an inverse relationship between TMT stock ownership and risk-adjusted performance.Research limitations/implicationsThe findings suggest that the firm stakeholders should reconsider the likely influence of option-based incentives and equity holdings on the risk-adjusted performance.Originality/valueMost executive compensation research focuses on either the pay-to-performance or pay-to-risk links. However, in this paper, the authors combine both the performance and risk dimensions simultaneously.

Journal

Journal of Strategy and ManagementEmerald Publishing

Published: May 15, 2017

References

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